A Study On The Household Effect Of China Income Distribution Institutional Reform

Nowadays, individual income gap in China is still large, no matter intra-urban region, intra-rural region, between urban and rural areas, or across regions. Chinese people are accustomed to seek a living, built the society and govern the state on the base of household, traditional small-peasant economy and natural structure of patriarchal clan are basis for all kinds of social, economic and law activities in China’s history, thus, it would be biased if we examined China distribution issues without a household perspective. This article is aimed to build a theoretical framework of income inequality from the perspective of household. And measure the household income gap systematically in our country and analyze its structure, as well as evaluate the efficiency of China income distribution institutional reform by household income indexes.The article builds a Household Income Estimated Function based on Household Utility Function of Family Economics, Mincer Wage Estimated Function of Labor Economics. At the background of income distribution institutional reform in China,and by the analytic ideology of“costs-income”with a rational man assumption, it builds a theoretical framework on household income inequality with Chinese characteristics; By using the pooled cross-sectional data of CHNS from 1989-2011, I calculates that the Household Gini Coefficient based on household total income is between 0.3968 and 0.5084. Since 1989, the Household Gini Coefficient has been increasing and in a high level, but since 2006, it has been going down slowly. It corroborates the inverted “U” trend of China’s individual income Gini Coefficient calculated by National Bureau of Statistics. Based on Piketty Percentile Structural Analysis, high income households account for major part of the total social income in China, the income distribution structure is like “reverse pyramid”. Households in rural area and mid-west regions, and those households, which the master is the young,are in disadvantage in terms of total social income distribution. Based on the household total income function, yi,t=f(di,t, hi,t, ri,t),which controlled of household demographic structure, the human capital character of family members, the external institution and the environment beyond households. I evaluate the household income distribution efficiency of China income distribution institutional reform based on reform of medical insurance, pension insurance and minimum wage system.According to the 2SLS regressions based on five waves’ pooled cross-sectional data in CHNS from 2000 to 2011, it shows that those families whose members attend the medical insurance, which directed mainly by the government, tend to increase their income dramatically. According to those analyses based on income percentile as well as urban-rural classification, the income-growth efficiency of China’s medical insurance system are mainly shown in households of low income, meanwhile, it is clearer in urban households rather than in rural households. According to the G. Field decomposition analysis, it shows that the reformed one has played an active role in narrowing the income gap, while it was going to make larger contributions to widen the income gap. According to the empirical research of the baseline national wave of CHARLS in 2011, households whose members attended the new rural medical service had increased their income in a universal way, and the household income gap has been relieved. The analysis shows that high income households had transferred their income to low income household, among them; the lowest income households had obtained the maximum benefits. Furthermore, the more members of people who are over 60 years old in a family, the more benefits the household can get. It is obvious that the reform of pension insurance can play an important role in narrowing China’s income gap. According to the OLS regressions based on four waves’ pooled cross-sectional data in CHNS from 2004 to 2011, it shows that the total household wage tend to increase signicifantly with the raise of minimum wage. And the results of quantile regressions demonstrate that, the income-growth efficiency of China’s minimum wage system is mainly shown in the lowest wage households, as well as the highest wage households because of the sensitive household structure.According to the G. Field decomposition analysis, it illustrates that the raise of minimum wage leads to wage inequality in current period and has played an active role in widening the wage gap cross periods. Therefore, current minimum wage system is helpless to narrow the income gap in China.In addition, I also measure the individual Gini Coefficient and evaluate the reform of China’s distribution systems based on household capital income weighted by person. It shows that the trend of individual level and household level are the same,which means the analyses in this article are robust. In order to improve China income distribution institutional reform, this article gives many detailed suggestions: the government should take the view of household into policy making and evaluation, pay attention to the factors in the aspect of household which are apt to cause incomeinequality, make and actualize income policies according to the Chinese characteristics of income inequality. In addition, the State Statistical Bureau is supposed to give detailed explanations on statistical object and measure index in annual Gini Coefficient publication.